To date, attempts to modify fee-for-service payment of physicians have focused only on price. Evidence is accumulating that, while many errors are inadvertent, some physicians are increasing their reimbursement by targeting the other component of the equation: codes describing the procedures performed.
Declines in impatient care and physician visits over the last five years have been more than offset by the increase in prices of all providers. The net result has been an actual increase in the rate of real growth in health care expenditures in the past decade because of lower general inflation. Cost containment efforts, having so far concentrated on reducing unnecessary use, now are beginning to address price. Additionally the focus has been on hospitals more than physicians. Yet the cost of physician services, the second largest component of health care costs, was 20.1 percent of total costs in 1986, up from 18.9 percent in 1980. Physician costs climbed 11 percent in 1986, compared with 7.7 percent for all medical costs and 1.5 percent for the general economy.
In an effort to retain patients amid increased health care competition, physicians are negotiating agreements with managed care programs such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Physicians give price concessions to these organizations through a negotiated fee schedule or a discount from historic charges. In addition, they agree to strong utilization controls to reduce unnecessary use. As a consequence, unless total patient volume increases, physicians have two primary options for maintaining their income. One is to increase dramatically their charges to fee-for-service patients whose benefit plans often pay the price that is customary in the physician community. The other is to up their charges to managed care programs by the indirect method of upcoding.
Incentives like these have driven the momentum in Washington, D.C. to reform the method of physician payment for Medicare and Medicaid. While various alternatives are being considered, such as capitation or physician diagnosis related groups (DRGs), widespread implementation of such approaches is not imminent. Instead, modifications to the fee-for-service payment system are likely in the next several years. If such reforms can maintain satisfactory levels of patient access while gaining physician support, a modified fee-for-service method may remain the major payment method.
Thus far, attempts to alter fee-for-service payment have included efforts such as: freezing Medicare physician fees for specified periods; developing a model for a Medicare resource based relative value scale to set prices for different physician services; and revising Medicaid fee schedules and Blue Shield relative value scales for physician reimbursement in Massachusetts.
These approaches address only part of the problem: establishing payment amount. A second, independent component for determining what physicians are paid is the code specifying the service provided. While true coding errors on payment claims will always occur, there also is evidence that some physicians are increasing their reimbursement by upcoding, assigning a higher paying code than a procedure merits, or by unpackaging services that were intended to be bundled into a single code. The administrative systems currently available are not adequate to detect and correct most of these errors.
Standard industry practice allows medical claims processors to enter the codes submitted on surgeon claims into a computer system. Fee screens are applied to these codes establishing the maximum amount that will be paid. Two coding methods most frequently used are the American Medical Association's "Current Procedural Terminology, Fourth Edition (CPT-4)," and the "California Relative Value Studies (CRVS)." Some claims administrators allow their claims processors to assign a code if it is absent from the claim; others return the claim to the physician's office for a code. Once entered into the claims processing systems, the code is typically edited for consistency with the age and sex of the patient, and sometimes for obvious rules in coding. After this step, if there is still a perceived problem with either the code or the fee, the claim is removed from the production process and referred for review by clinical staff. This reviewer, usually a nurse, may request the surgeon's official operative report, a required part of the hospital record, and/or call for a physician to review the claim. A payment for the claim, if approved, is established, and the claim is returned to the processor for payment. Emphasis throughout the insurance industry is on minimizing the time between when a claim is received and when it is paid, rather than on its accuracy.
While the problems detailed above are generally accepted, the concern is whether the cost of obtaining the savings will warrant the effort. The solution requires that medical judgment be applied to select the most appropriate code(s) when subtle clinical distinctions result in significant differences in payment to the medical care provider, or to decide when to request additional information from the provider. However, applying the required expert medical judgment has the potential of slowing down the processing of claims and significantly increasing the cost of doing so. At present, processing of medical claims is done on an automated basis using computer systems by relatively unskilled workers who input data, including the CPT-4 codes, into the computer and process them for payment. Usually, such an operator is unaware of whether the entity to whom the request for payment is made, such as an insurance company, should pay or not pay the claim as submitted. It is impractical for each of the operators to have a trained medical physician or technician to sit by the operator and decide whether a particular claim should be paid or not. The expense of such supervision would result in costs which would offset any savings realized by paying only the appropriate amount of the claim. Also, with a multiplicity of such medical reviewers, inconsistent results would occur. Therefore, to save expenses while maintaining productivity of the processing system, medical judgment must be incorporated in an automated data processing system which contains decision rules that can be used to automate the review of claims being processed.
In order to provide a cost effective automated data processing system for achieving the desired results in paying only appropriately coded claim amounts, expert systems or artificial intelligence software provides the vehicle for widespread distribution of an expert's decision-making guidance. An expert system in the form of a computer program is one which reasons like a human expert to solve the problems associated with appropriate coding of medical treatment for claims payments.